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US court set to weigh biofuel blend mandates

  • Spanish Market: Agriculture, Biofuels, Emissions, Natural gas, Oil products
  • 31/10/24

A US court on Friday will weigh some novel issues that could affect enforcement of the Renewable Fuel Standard (RFS), the federal program that sets minimum biofuel blending levels for domestic motor fuel supplies.

The Environmental Protection Agency (EPA) in last year's RFS regulation required refiners and importers to blend increasing volumes of renewable fuel from 2023-2025. But the rule differed from past obligations in a crucial way. While the RFS law set annual volume targets of cellulosic, advanced and conventional biofuels through 2022, it tasked EPA with setting volumes in subsequent years by balancing factors such as the environmental impacts of biofuels, energy security, expected production and consumer costs.

In a consolidated case to be heard Friday by the US Court of Appeals for the District of Columbia Circuit, environmental groups and oil refiners are separately challenging aspects of how the EPA applied those factors in setting 2023-25 volumes. The court has previously affirmed the legality of many RFS rules.

"Past cases always give you some perspective on how the DC court might see it," said Susan Lafferty, a partner at law firm Holland & Knight. "But the DC court could also say, ‘not relevant anymore because this is a different part of the statute that we are working with.'"

Refiners say EPA misapplied the criteria, upping compliance costs more than necessary by setting targets for cellulosic and conventional biofuels too high and targets for advanced biofuels too low. They also challenge EPA's balancing of potential impacts, noting that the agency assumed that all parties can easily pass the costs of compliance on to consumers. In a separate case this year, the DC Circuit discarded EPA rejections of program waiver petitions, in part because judges disagreed that refiners can easily pass on the cost of Renewable Identification Number (RIN) credits used to show compliance with the RFS program.

EPA used this pass-through theory in the 2023-2025 rule "like a magic wand, waving it around to dismiss any argument that the rule will cause harm", the American Fuel and Petrochemical Manufacturers and small refineries said in a case filing.

Lafferty expects the judges at Friday's hearing to probe the extent to which EPA's volumes relied on this pass-through theory, "a policy that now this very court has gutted."

Environmentalists have similarly targeted EPA's cost analysis, arguing that the agency downplayed the environmental drawbacks of growing crops for energy. The Center for Biological Diversity and the National Wildlife Federation argue that EPA has legal discretion to set post-2022 volumes for corn- and soybean-derived biofuels as low as zero.

EPA counters that the court owes the agency deference in evaluating scientific data and making predictive judgments. And biofuel groups that have intervened argue that the program is designed to require more biofuel production even if there are no formal volume requirements in law anymore.

While EPA's post-2022 authority to set blend mandates is a new issue, the DC Circuit has handled various cases about EPA's implementation and has generally been deferential to the agency's volume decisions. The court this year upheld 2020-2022 targets. In a 2019 decision, the court kept volumes in place, despite telling EPA to more deeply weigh endangered species impacts. While the court might take issue with some aspects of EPA's latest rule, including the agency's lateness in finalizing volumes, judges could again be reluctant to upend fuel markets if they find only small oversights.

Depending on how skeptical judges appear about EPA's arguments on Friday, the case could cause concern for biorefineries. A decision is expected next year, meaning any order for EPA to better justify its decisions or go back to the drawing board would likely fall to the next president's administration.

On the panel for Friday's hearing are two judges familiar with the program: Democratic appointee Cornelia Pillard, who wrote the opinion this year upholding 2020-2022 blend mandates, and Republican appointee Gregory Katsas, who dissented and said those volumes were excessive. The third judge on the panel is Democratic appointee J. Michelle Childs.

RINcrease or decrease

RIN market activity has thinned as participants await the results of the court case and November's presidential election. In its latest rule, EPA aimed to provide a clearer picture over a longer timeline by finalizing volumes over multiple years. But the agency underestimated the growth in renewable diesel production, partly because of unexpectedly high feedstock imports.

The result has been persistent oversupply, which took D4 biomass-based diesel credit prices from around 150¢/RIN in spring last year to as low as 42¢/RIN a year later according to Argus assessments. Multiple refiners have consequently dialed back biofuel production.

In the past, RIN prices have proven sensitive to legal developments as traders anticipate supply and demand shifts. Prices softened this summer after the DC Circuit vacated small refinery waivers, leaving it unclear whether many facilities would have to buy RIN credits at all.


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10/12/24

Brazil's inflation accelerates to near 5pc in November

Brazil's inflation accelerates to near 5pc in November

Sao Paulo, 10 December (Argus) — Brazil's headline inflation accelerated to a 14-month high in November, led by gains in food and transportation, according to government statistics agency IBGE. The consumer price index (CPI) rose to an annual 4.87pc in November from 4.76pc in the previous month, IBGE said. Food and beverage costs rose by an annual 7.63pc in November, accounting for much of the monthly increase, following a 6.65pc annual gain in October. Beef costs increased by an annual 15.43pc in November following an 8.33pc annual gain for the prior month. Higher beef costs in the domestic market are related to the Brazilian real's depreciation to the US dollar, with the exchange rate falling to a record-low R6.11/$1 at the end of November. The stronger dollar leads producers to prefer exports over domestic sales. Beef prices rose by 8pc for the month alone. Soybean oil prices rose by 27.75pc over the year. Transportation costs, another major contributor to the monthly acceleration, rose by an annual 3.11pc in November after a 2.48pc gain in October. On a monthly basis, transportation costs rose by 0.89pc in November, reversing a contraction of 0.38pc in October. Housing costs rose by 4pc over the 12-month period. Brazil's central bank last month hiked its target rate to 11.25pc, its second increase off a low of 10.5pc between May and September, to try to head off a resurgence in inflation. It was at a cyclical peak of 13.75pc from August 2022 through July 2023 as it sought to tamp down the post-Covid-19 surge in inflation. Fuel prices rose by an annual 8.78pc in November after a 7.22pc gain in October. Motor fuel costs fell by 0.15pc in November compared with a 0.17pc drop in October — thanks to lower ethanol and gasoline prices. Diesel prices contracted by 2.25pc in the 12-month period. Power costs slowed to an annual 3.46pc in November following a 11.58pc gain in October. Electricity prices contracted by a monthly 6.27pc after a decrease in power tariffs on 1 November. Monthly inflation slowed to 0.39pc in November from 0.56pc in October. The central bank's inflation goal for 2024 is 3pc, with a margin of 1.5pc above or below. By Maria Frazatto and Lucas Parolin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexico’s CRE lays off officials after reform


10/12/24
10/12/24

Mexico’s CRE lays off officials after reform

Mexico City, 10 December (Argus) — Mexico's energy regulatory commission (CRE) has dismissed high-ranking officials and other staff shortly after congress approved constitutional amendments to eliminate independent regulators, market sources said. At least two unit chiefs — the heads of the legal and hydrocarbons units — were let go in recent days, sources with close knowledge of the matter told Argus . These positions are now marked as vacant in the CRE's online directory. In addition, seven subunits within the hydrocarbons division — overseeing natural gas, fuel and LPG markets, including storage and transportation — also appear vacant. The CRE did not respond to requests for comment. The CRE's commissioner president Leopoldo Melchi has designated Guadalupe Hernandez, a legal official in the hydrocarbons undersecretary at the energy ministry (Sener), to oversee certain functions, a source said. The layoffs are also expected to extend to the electricity unit, including its chief, Francisco Varela, according to market sources. Yet, these positions are still listed as filled in the online directory. These dismissals follow congress' approval of constitutional amendments to dismantle seven independent regulators, including the CRE and hydrocarbons regulator CNH. While the regulators will continue operating until laws implementing these changes are enacted — expected by early 2025 — the finance ministry has proposed a 33pc budget cut for the CRE and CNH in 2025. Some recent departures are linked to commissioner Luis Linares, who announced in November that he will step down on 1 January 2025. But the recent layoffs may signal a broader restructuring of the energy regulator. Under the amendments, the CRE's functions will be absorbed by a new office within Sener. The specifics of this transition will depend on the upcoming legal framework. Industry experts and companies are calling for the new regulatory bodies to retain technical independence and sufficient funding to oversee energy markets effectively, even after the constitutional changes. By Édgar Sígler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Norway to end new international fossil fuel financing


10/12/24
10/12/24

Norway to end new international fossil fuel financing

London, 10 December (Argus) — Norway will from January no longer provide public finance for new unabated international fossil fuel projects, in line with a commitment it made in December last year. Norway's export credit agency, Eksfin, provides most of the country's financing for overseas fossil fuel projects. Eksfin provided between 8.78bn Norwegian kroner and 10.98bn NKr ($786mn- 983mn) over July 2021-June 2023 for fossil fuel projects, civil society organisation Oil Change International found. Norway signed the Clean Energy Transition Partnership (CETP) at the UN Cop 28 climate summit in 2023. The CETP aims to shift international public finance "from the unabated fossil fuel energy sector to the clean energy transition". The CETP, which now has 41 signatories, was launched at Cop 26 in 2021, with an initial 39 signatories including most G7 nations and several development banks. Signatories commit to ending new direct public support for overseas unabated fossil fuel projects within a year of joining. Abatement, under the CETP, refers to "a high level of emissions reductions" through operational carbon capture technology or "other effective technologies". It does not count offsets or credits. Australia, which also signed the CETP at Cop 28, said last week that it would no longer finance overseas fossil fuel projects. "Norway is also working to introduce common regulations for financing fossil energy within the international main agreement for state export financing in the OECD", the Norwegian government said today. Norway's policy "helps increase momentum" for an OECD deal that could end $41bn/yr in oil and gas export financing, Oil Change said. Countries are involved in "final negotiations" on the deal today, Oil Change added. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Assad’s ouster removes key outlet for Iran’s crude


10/12/24
10/12/24

Assad’s ouster removes key outlet for Iran’s crude

Dubai, 10 December (Argus) — The removal of Syrian president Bashar al-Assad from power over the weekend has not only dealt a major blow to Iran and its designs for the Levant region, but it has also eliminated a critically important outlet for Tehran's sanctions-hit oil. Long considered Iran's top Arab ally, Assad enjoyed significant military and economic support from Tehran over the past decade, as Iran saw him as the focal point for its regional influence. Syria also provided the main supply routes to Lebanon's Hezbollah militia, the crown jewel in Iran's so-called ‘Axis of Resistance'. Part of Iran's assistance was in the form of shipments of crude and refined oil products to help Assad's regime meet fuel demand in the areas under its control. Once a 600,000 b/d-plus producer, Syria's crude output has been on the decline over the past three decades. Just before the start of the civil war in 2011, production had already slipped below 400,000 b/d. Today, it is less than 100,000 b/d, and only around 16,000 b/d of that comes from fields in areas under the former government's control. This left Assad's regime — itself restricted by western sanctions — critically short of crude to feed its two refineries in Banias and Homs, even though both have been operating below capacity because of damage sustained during the civil war. Iran helped plug the gap by sending crude and products to the 140,000 b/d Banias refinery on Syria's Mediterranean coast on an ad hoc basis. Iranian crude exports to Syria averaged around 55,000 b/d in January-November this year, down from 80,000 b/d in 2023 and 72,000 b/d in 2022, according to data from trade analytics firm Kpler. Vortexa puts shipments higher at 60,000-70,000 b/d so far this year and 90,000 b/d in 2023. Iran has also been sending around 10,000-20,000 b/d of refined products to Syria in recent years, according to consultancy FGE. Wait and see Iran's oil exports to Syria have mostly been in the form of grants to support the Assad regime. The government's collapse could put an end to these flows for the time being, while Tehran takes a wait-and-see approach to what comes next in Syria. The first sign of that came over the weekend when the Iran-flagged Lotus , which left Kharg Island on 11 November destined for Banias, reversed course just as it was about to enter the Suez Canal. The tanker is now headed back through the Red Sea without specifying a destination. Although supplies to Syria make up a very small share of Iran's overall 1.6mn-1.8mn b/d of crude exports, Tehran may not want to lose it as an outlet for good, given the difficulties of finding a replacement while sanctions remain in place. "The flow will stop, at least for the time being," said Iman Nasseri, managing director for the Middle East at FGE. "But Iran will want to continue supplying this oil to Syria, or else it may be forced to cut production by anywhere between 50,000-100,000 b/d if it is unable to ultimately place those barrels in China." Argus estimates Iran produced around 3.33mn b/d in September-November. Alternatively, Iran could opt to build the volumes it holds offshore in floating storage. "We usually see the same tankers shuttling between Iran and Syria," according to Vortexa's senior oil analyst Armen Azizian. "If that trade subsides, we could see some of these tankers unemployed or put into floating storage, which would rise, at least in the short-term," he said. Lotus is one of these tankers, having made the trip to Syria and back five times in 2023, and twice so far in 2024. The crude cargo it is carrying now "could be returned to Iran and put into onshore tanks or go into floating storage off Iran," Azizian said. By Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

ExxonMobil to accelerate PNG’s P'nyang gas development


10/12/24
10/12/24

ExxonMobil to accelerate PNG’s P'nyang gas development

Sydney, 10 December (Argus) — ExxonMobil plans to expedite the next stage of its 4.4 trillion ft³ (125bn m³) P'nyang gas field in Papua New Guinea (PNG), which is considered critical to the future of the nation's two major LNG projects. Exxon, the operator of the 6.9mn t/yr PNG LNG joint venture, will bring pre-engineering works forward to April-June 2025 by accelerating the concept select phase that is presently underway. This would bring it forward "years sooner than previously envisaged," said ExxonMobil PNG's senior vice-president of commercial development, Johanna Boothey, at the PNG Resources and Energy Investment Conference in Sydney, Australia on 10 December "We expect to undertake initial ground surveys and to establish a project office in Western Province in the coming weeks," she added. PNG's government in March signed a fiscal stability agreement for the P'nyang project with PNG LNG partners. A final investment decision (FID) for the P'nyang field is targeted for 2029, following the start-up of the planned 5.6mn t/yr Papua LNG export terminal, with synchronisation between the two projects seen as guiding the investment timeline. But further delays to the Papua LNG project could cause feedstock shortages at PNG LNG, as the former project is expected to provide 2mn t/yr worth of gas to the latter. Continuing concerns about Papua LNG's FID slipping further may prompt Exxon to further advance P'nyang's development timeline. ExxonMobil holds 49pc of P'nyang, Australian independent Santos controls 38.5pc while Japanese upstream firm JX Nippon has a 12.5pc stake. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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